Creditor’s Rights

Creditor’s Rights

Individuals filing bankruptcy are entitled to an automatic stay that prevents creditors from collecting on debts until the bankruptcy is dissolved. However, creditors also have the right to request relief from the automatic stay and collect on the debt. When a creditor gets a bankruptcy notice, their rights will depend on the type of debt owed and the nature of the bankruptcy. A creditor of a secured debt may be able to file a claim for relief from the automatic stay. The creditor must show “cause” for granting the relief, and should obtain an attorney to request this relief. However, this relief does not remove the property from the bankruptcy estate or transfer ownership of the property to the creditor. It simply restores the creditor’s right to take action to collect debts. Additionally, upon the 341 meeting in a Chapter 7 bankruptcy, creditors have the right to object to or challenge the exemptions a debtor is claiming.

A creditor must also determine whether or not the type of debt owed is dischargeable. If the debt is dischargeable, there are options for creditors to seek the prevention of the debt being discharged. A creditor whose claim against the debtor was incurred by fraud, dishonesty or other intentional “bad acts” or which is not a support claim resulting from divorce may contest the discharge of the debt in a Chapter 7 bankruptcy by filing a timely suit and proving that the debt fits within the category of a non-dischargeable debt. This must be filed within 60 days of the first meeting of creditors or the debt will be discharged.

If you have creditor’s threatening you, and want to know your rights, contact the Birmingham legal team at Parkman White, LLP at 205-502-2000 to assist you with your creditor rights questions.

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